SPECULATIVE GROWTH

EVVV

I am taking a hard look of EVVV as it fell off its IPO level. Obviously this is a speculative stock as it does not have any earnings. However, it does have a pretty good growth profile as its revenues have been growth at 50%+ over the past couple of years and it is expected to continue. It expects to turn into profit in FY07 with EPS of 0.67. The stock is traded at about 20X of E07, with a 50% top-line growth rate. It has a good product pipeline with a number of approvals and launches in FY06, starting in Q1. Q3/05 results and outlook are pretty good, and at current level, valuation appears reasonable.

Technically, it appears it could test its low at 13. It is in the medical equipment sector, which has fallen out of favor lately. Overall market could peak here as well. One more factor is the expiration of lock-out, which happens on December 13. While management maintains that it has no intention to sell, perception alone could bring more pressure on this stock. Shouldn’t I wait for sale?

In any event, I intend to take a small position in the next few days, preferably at 13 level and hold it into 2006. It the company could maintain its growth profile, it should be traded back to 20s. A couple of approvals or launches in early 2006 could provide some catalysts.